International Monetary Fund (IMF) expects India's inflation to hover around 2 per cent during 2009-10, mainly on account of declining commodity prices and weakening demand resulting from economic slowdown.

"With commodity prices waning and demand slackening, inflation is expected to fall further to 3 per cent by March 2009 and to 2 per cent on average in 2009-10", the IMF said in its annual review of the Indian economy.

The inflation rate, as per the provisional government data, has dipped to 2.43 per cent for the week ended March 1, 2009, much ahead of the IMF's March-end projection of 3 per cent.

As per the IMF data, inflation is expected to average around 8.8 per cent during the current fiscal which witnessed historic increase in crude oil and commodity prices in the international market and subsequent impact on the Indian economy.

The inflation, which peaked to 12.91 per cent in the second week of August last year, has been declining and the fall became sharper following the global financial meltdown triggered by the collapse of iconic American investment banker Lehman Brothers in September.

IMF holds Article IV consultations with the member countries annually as part of the surveillance and monitoring exercise.